Regardless of whether you benefit from deductions such as mortgage interest or not, most tax deductions were implemented to control behavior, in this case to make home purchases a little more enticing.
As you might suspect, Democrats are fine with having you think that Republican presidential candidate Mitt Romney would cut the mortgage interest deduction …
That’s even though the Republicans inserted language in their platform about the deduction, saying they would preserve the mortgage-interest break in the event that Congress fails to accomplish wider tax reform.
Meanwhile, President Obama has made clear the deduction would be safe under his watch. “I refuse to ask middle-class families to give up their deductions for owning a home or raising their kids just to pay for another millionaire’s tax cut,” he said during his acceptance speech at the Democratic National Convention.
Obama never wastes an opportunity to stir up a little more of the old “class envy,” perpetuating the mistaken belief that all money the wealthy possess, permanently removes any opportunity for others to earn some of their own – that there is only a finite amount of money in our economy – and the wealthy simply took most of it away from the less fortunate.
There’s a new money supply created every day simply due to Obama’s printing presses running 24-7 to keep up with spending money he doesn’t have – but I digress.
The mortgage interest deduction was just one of many interest payments qualifying for tax deductions, which were deductible for decades. In 1986, all other interest deductions were removed from the tax code except the interest paid on mortgages and home equity loans.
Even a liberal like Froma Harrop got some things right and some things wrong in her article, “Time to end mortgage tax deduction” in the Rockford Register Star. She does seem to understand that income tax deductions provided by the IRS are government social engineering.
What we see here is social engineering gone haywire. The federal government should not care whether you buy or rent your residence. Because lower-income people are more likely to rent, they are left out. Because higher-income people are more likely to have bigger houses with bigger mortgages, they benefit disproportionately. Meanwhile, the deduction is useless to those who don’t itemize, which is most taxpayers.
The higher income people, Ms Harrop, do not benefit disproportionately. They pay more in interest on the larger home and deduct the interest they pay - the same as the lower income owner. They pay more, so the deduction is more, unless we also start limiting the amount a “wealthy” homeowner can deduct by reducing the benefit proportional to their income – more socialism!
Ms. Harrop also says the mortgage deduction COSTS the Treasury about $100B a year. No, it doesn’t cost the government anything. It allows the taxpayers to keep more of their own earnings. It’s not the Treasury’s money. The government doesn’t have any money unless they take it from us – but I digress again – easy to do when you must deal with liberal doublethink.
The real answer is to get rid of all deductions, all subsidies, basically all government control of what we do to obtain tax deductions, tax credits, the mountains of receipts, tracking medical expenses, etc., time and money spent to fill out complicated forms.
How do we do that? Implement a flat tax on everything above a predetermined minimum amount, say $35,000, which is not taxed helping those who are poor – meaning the home interest deduction would be eliminated.